Wide range of apps drive contactless smart cards

While often talked about as a future technology, IMS Research reports that many uses for contactless smart cards have already emerged. Advantages gained from their use include fast and efficient metro systems, safe use of contactless debit cards, and quicker transfers in airports with biometric passports. The report on Smart Cards & Smart Card ICs forecasts 100.00 crore contactless smart cards will be shipping per year by 2014.

According to report analyst Don Tait, "The market for contactless is set to nearly double between 2008 and 2014 as the three largest end-user sectors, government and healthcare ID, transportation and payment & banking cards, all see contactless gain more traction."

The government and healthcare sector is the largest contactless application for smart cards, having been traditionally driven by shipments of contactless memory cards into China's national ID programme. However, IMS Research expects that in the future it will comprise of a growing number of smaller schemes employing microcontroller-based cards, such as driver's licences, healthcare, national ID and e-passports in many different countries.

In the transportation sector, ease and speed of use with minimal human intervention and enhanced security features are key market drivers to the adoption of contactless smart cards. Contactless is able to increase traveller throughput and pre-paid electronic ticketing, parking payment and toll collection are prime examples where it is increasingly used to deliver better service and an improved customer experience.

Despite few shipments to date compared to ID and transportation, payment and banking is set to be the fastest growing area for contactless. With card issuers and banks pushing contactless in key markets, consumer awareness and acceptance of contactless smart cards is now growing. More and more retailers have successfully trialled contactless and the convenience offered of making payments in this manner has been highlighted. The increasing rollout of contactless payment terminals at point of sale will increase the adoption of contactless payments as it offers fast and convenient transactions.

However, it is not always a smooth ride for contactless adoption. John Devlin, research director, IMS Research, noted that "One key area that has yet to fully adopt contactless is mobile. Much has been done to promote and implement contactless SIM cards with NFC but there remain issues to be addressed, which will take time to resolve. One is the lack of a common certification standard which ensures out of the box compliance for the different pieces of the NFC puzzle. Another, and perhaps the most important, is the lack of a progressive and universal business agreement between the various stakeholders as to how to best implement a mobile-NFC payment ecosystem."

Progress is being made though, with Nokia and significant others such as MasterCard and Visa backing NFC, along with on-going trials of the technology in "open environments". Despite this, IMS Research is not forecasting major contactless shipments in mobile until 2012.